Real estate is a hot topic in Denver right now. Units are selling like hotcakes, with the average amount of time on market reaching as low as 26 days to date this year (this is a staggering 35% drop over last year, to date.) The average selling price of a home is up almost 15%, at $384,863, the amount of new listings is down 0.8%, with 7,153 new units to date this year, and houses are roughly selling at 100.6% of list price, up 1.4% this year to date.
So what has caused all the commotion in the real estate market? Simply put, the market in Denver, Colorado is going through some tough times right now. Last year’s spike in median home values, combined with reduced FHA mortgage insurance rates and lenders’ relaxed requirements on home loans has caused a recent surge in buyers – and roughly one quarter of these new buyers were hardcore real estate investors that saw a great opportunity in the rapid rise of home values. As a result, this influx of private buyers and investors has gobbled Denver’s already low housing supply to the lowest levels they’ve been in many years. Adding to the headaches is the fact that construction companies simply can’t build new houses quickly enough to keep up with the rising demand. New construction doesn’t happen overnight. These projects must be properly permitted and inspected at regular intervals. Utilities such as plumbing, electric, and heating and cooling, and even the building itself must be built to specific codes as specified by state laws.
However, it’s not all gloom and doom on the housing front. If you come in with a high all cash offer, and close the deal as quickly as possible, you will have an advantage over other buyers, as cash is still the preferred medium of exchange for sellers. Furthermore, there is an increase in appraisals coming in at value. Over the past few years, appraisal companies were undervaluing homes in order to keep their underwriters happy. This year has seen a shift in priority for appraisal companies, however. Also, as I stated in my earlier paragraph, lenders are relaxing their requirements for home loans. Talk to your local specialist, and they just might be able to work something out with you!
If you’re thinking about investing in real estate in Denver right now, you might want to hold off until conditions improve. With the amount of competition on the market right now, combined with falling housing supply, and all cash transactions taking precedence over all else for sellers, there’s a high probability that what’s available right now in the way of seriously profitable housing will be gone very soon – if it isn’t gone already. If you do decide to risk it though, be prepared for a fight, as you will be up against fierce competition. And unless demand falls, or construction companies can pick up the pace in regard to new housing, I don’t see this situation letting up any time soon. However, if you began investing last year, then congratulations – you got a nice return on your investment!